More homeowners are turning to house hacking to make a little extra cash from their properties and keep their finances in check.
To find out if this is a strategy you could make use of, here is a brief guide to the ins and outs of house hacking in the modern era.
Understanding the basics
While the term ‘house hacking’ is relatively new, the principles it describes are well established at this point.
The idea is that rather than buying property simply to live in, you can treat it like an investment from which you actively earn income.
The main way to generate cash from a home you own is to rent out a portion of it to a third party. That way you are pulling in rental payments and thus offsetting the costs of your mortgage.
Of course if you have secured favorable mortgage rates by clicking this link, then your monthly outgoings should be acceptable. Even so, it still pays to realize some of the value of your property through house hacking, and save towards the next steps you want to take in your life.
Considering your options
Now you have a sense of what house hacking is, it’s time to look at the options you have for achieving it as a homeowner.
Firstly, you could purchase a multi-unit property, or divide your existing house into two or more units, and rent out the space to anyone who needs a place to stay, while you remain resident in the remaining portion of the premises.
Be aware that in this instance, you will need to take onboard any local zoning laws and other rules and regulations governing the use of domestic residences in this way.
You will also need to factor in tax regulations which may apply if you adopt this approach, which is true of any new income stream you start to generate.
Second, you could take a slightly different route and rent out the entire property, setting aside only a small separate area on the premises for your own use. It is increasingly common for homeowners to create livable outbuildings and micro-homes in the grounds of a larger property, while leasing the primary residence.
Third, you might be eager to make a career in the property market, buying homes that are in need of renovations and then getting the work done to bring them up to modern standards so that they can be sold at a profit.
The big players in this market tend to do this on a large scale, and live elsewhere while work is completed. However, if you are on a shoestring budget then staying on-site while renovations are taking place will save you a bundle and also help you to become more familiar with what is involved in this kind of work.
Other aspects to keep in mind
We have already touched on the tax implications of house hacking, and of course this is worth investigating with the help of a financial advisor so that you can do it in an above-board way.
There are also additional expenses to build into your calculations when you decide to make money from your home.
For example, you will likely be required to cover the costs of maintaining the parts of the property you rent out to meet minimum standards, and will also benefit from getting insurance to protect you in various unpleasant scenarios that can arise.
So if house hacking is an attractive idea, now is the time to get involved, especially as mortgage rates could rise soon.